1) Which of the following statements regarding proposed regulations is not correct? A. Proposed and temporary regulations are generally issued simultaneously. B. Proposed regulations do not provide any insight into the IRS's interpretation of the tax law. C. Proposed regulations expire after 3 years.
D. Practitioners and other interested parties may comment on proposed regulations.
2) Regulations are
A. presumed to be valid and to have almost the same weight as the IRC B. equal in authority to legislation if interpretative
C. equal in authority to legislation
D. equal in authority to legislation if statutory
3) Which of the following courts is not a trial court for tax cases? A. U.S. Tax Court
B. U.S. Court of Federal Claims
C. U.S. Bankruptcy Court
D. U.S. District Court
4) Which of the following statements is incorrect?
A. Limited partners' liability for partnership debt is limited to their amount of investment. B. In a general partnership, all partners have unlimited liability for partnership debts. C. In a limited partnership, all partners participate in managerial decision-making. D. All of the statements are correct.
5) Which of the following is an advantage of a sole proprietorship over other business forms? A. Low tax rates on dividends
B. Ease of formation
C. Tax-exempt treatment of fringe benefits
D. The deduction for compensation paid to the owner
6) Which of the following statements is correct?
A. S shareholders are taxed on their proportionate share of earnings that are distributed. B. S shareholders are taxed on their proportionate share of earnings whether or not distributed. C. An owner of a C corporation is taxed on his or her proportionate share of earnings. D. S shareholders are only taxed on distributions.
7) Three members form an LLC in the current year. Which of the following statements is incorrect? A. The LLC can elect to be taxed as a C corporation with no special tax consequences. B. If the LLC elects to use its default classification, it can elect to change its status to being taxed as a C corporation beginning with the third tax year after the initial classification. C. The LLC's default classification under the check-the-box rules is as a partnership. D. The LLC can elect to have its default classification ignored.
8) Identify which of the following statements is true.
A. Under the check-the-box regulations, an LLC that has one member (owner) may be disregarded as an entity separate from its owner. B. An unincorporated business may not be taxed as a corporation. C. A new LLC that is owned by four members elects to be taxed under its default classification (as a partnership) in its first year of operations. The entity is prohibited from changing its tax classification at any time in the future. D. All are false.
9) Identify which of the following statements is true.
A. The check-the-box regulations permit an LLC to be taxed as a C corporation. B. Under the check-the-box regulations, an LLC that has only two members (owners) default classification is as a partnership. C. Once an election is made to change its classification, an entity cannot change again for 60 months. D. All of the statements are true.
10) Rose and Wayne form a new corporation. Rose contributes cash for 85% of the stock and Wayne contributes services for 15% of the stock. The tax effect is A. Rose and Wayne are not required to recognize their realized gains. B. Wayne must report the FMV of the stock received as capital gain. C. Rose and Wayne must recognize their realized gains, if any. D. Wayne must report the FMV of the stock received as ordinary income.
11) Matt and Sheila form Krupp Corporation. Matt contributes property with a FMV of $55,000 and a basis of $35,000. Sheila contributes property with a FMV of $75,000 and a basis of $40,000. Matt sells his stock to Paul shortly after the exchange. The transaction will A. qualify...
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